Mercutio is somewhat like his namesake, Mercury. He is mercurial, which is to say, he changes quickly, at least verbally, and he likes to spin ridiculous and extended stories. If he were more mean-spirited, you might think of him as liking to, um, "BS" people. Mostly, though, he likes to joke around.
When Romeo sighs over love, Mercutio tries to bring him down to earth. He also shifts the talk from lofty love to pretty earthy sex.
When he's alive, he is comic relief and Romeo's friend. In his death, he changes everything. Tybalt kills him, and Romeo kills Tybalt. This gets him exiled, and starts everything down the final road to ruin.